Math is biased against forex traders!?

if u profit 50$ and lose 50$ your capital would be the same
if u profit 50$ three times and lose 50$ three times your capital would be the same no matter the order of profiting and losing
that is quite obvious

but let us examine the following

if u profit 50% of your capital and lose 50% of it it ,you would end with 75% of your initial capital which means you will end in loss
ex: initial capital = 100$ ...after 50% profit capital = 150$...after 50% loss capital = 75$
if u changed the order of win and loss u get the same result
ex:initial capital = 100$ ...after 50% loss capital = 50$...after 50% profit capital = 75$ (same result)

if u profit 50% twice of your capital and lose 50% of it it twice ,you would end with 56.25% of your initial capital which means you will end in loss no matter the order of profit and loss

if u profit 50% of your capital three times and lose 50% of it three times ,you would end with 42.1875 % of your initial capital which means you will end in loss no matter the order of profit and loss

so in general : if u win a certain ratio of your capital (50% or 10% or ...) a certain number of times (2 or 3 or ...)and lose with the same ratio a same number of times you will end in loss no matter the order or sequence of profit and loss

this means :if your trading volume ,takeprofit and stoploss is a ratio of your initial capital then the results will be biased against you mathematicaly

i wish i can overcome this bias ,any ideas ?

It's all about expectancy.

If you risk the same amount that you win (e.g. 50% in your examples), you must win more often than you lose.

If you risk less than the amount that you win (e.g. you win 50% per winning trade, but lose 25% per losing trade), then you do not need to win more often than you lose, but you need to still win often enough to overcome losses.

It's all about money management and expectancy. Google money management, there's a lot of good books on the topic (Trade Your Way to Financial Freedom by Van K Tharp is one that's read by a lot of traders).

Dear Poster,

Try to compare a sequence with fixed bet size vs. fixed fraction bet size or compounding.

H. Rearden

well if u know what to do, i don't think your win/lose ratio would be 50/50. Unless you rely only on your instincts! =))

Many professional and institutional traders lose more often than they win, but when they win they win big. You can lose 99 trades at $1 a piece, but if that 100th trade earns $100 then you are still profitable.

This has been discussed previously, in some depth - see post #22 onwards, in this thread.

Also, see Tdion's advanced MM thread for an approach to overcoming the imbalance that you talk about.

There are more concepts discussed in this thread. It's the most informative MM thread that I've encountered on FF.

if u profit 50$ and lose 50$ your capital would be the same
if u profit 50$ three times and lose 50$ three times your capital would be the same no matter the order of profiting and losing
that is quite obvious

but let us examine the following

if u profit 50% of your capital and lose 50% of it it ,you would end with 75% of your initial capital which means you will end in loss
ex: initial capital = 100$ ...after 50% profit capital = 150$...after 50% loss capital = 75$
if u changed the order of win and loss u get the same result
ex:initial capital = 100$ ...after 50% loss capital = 50$...after 50% profit capital = 75$ (same result)

A loss is still a loss no matter how you calculate it. There is NO formula that will turn a loss into a win

if u profit 50% twice of your capital and lose 50% of it it twice ,you would end with 56.25% of your initial capital which means you will end in loss no matter the order of profit and loss

You have to think about your win/loss rate versus your risk/reward ratio. In this scenario your risk/reward is way to low for what your win rate is. There is no mathematical formula that can turn a loss into a win

if u profit 50% of your capital three times and lose 50% of it three times ,you would end with 42.1875 % of your initial capital which means you will end in loss no matter the order of profit and loss

so in general : if u win a certain ratio of your capital (50% or 10% or ...) a certain number of times (2 or 3 or ...)and lose with the same ratio a same number of times you will end in loss no matter the order or sequence of profit and loss

True, again there is no mathamatical formula that will turn a loss into a profit

this means :if your trading volume ,takeprofit and stoploss is a ratio of your initial capital then the results will be biased against you mathematicaly

i wish i can overcome this bias ,any ideas ?

It should not be based on your initial capital, but on your current capital.

I hope that helped!